Breaking News
0

Blame China; Blame The US Fed, Whatever… August Hedge Fund Numbers

By AllAboutAlpha Market OverviewSep 22, 2015 01:16AM ET
www.investing.com/analysis/blame-china;-blame-the-us-fed,-whatever%E2%80%A6-august-hedge-fund-numbers-265783
Blame China; Blame The US Fed, Whatever… August Hedge Fund Numbers
By AllAboutAlpha   |  Sep 22, 2015 01:16AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

According to the latest report from Eurekahedge, the hedge fund industry outperformed underlying markets in the month of August by 4.85%. The outperformance YTD is 3.19%, because the MSCI World Index YTD is down 1.90% for the year, while hedge funds are in the black 1.29%.

Nonetheless, looking at August in terms of its own numbers: it was bad. The chart at the top of this entry indicates just how bad, on a region by region basis. The red bars represent July’s HF industry performance in various mandate regions, while those in blue represent August. The blue is worse than the red, everywhere. Also, the blue is in negative territory everywhere.

Japanese managers won the month. They saw their funds value decline only 0.35% even while the Nikkei 225 25 lost 8.23% and the TOPIX lost 7.38%

Vol and Fat Tails

The report also speaks to volatility, invoking for this purpose the CBOE Eurekahedge Volatility Indexes, that is, four equally-weighted volatility indices: long volatility, short volatility, relative value and tail risk.

It paid to be long volatility in August. Also, fat-tail trades came in.

On a year-to-date basis, though, the CBOE-Eurekahedge Relative Value Index remains the best performer of these four, and tail risk is the worst. Relative Value is up 2.48% YTD, followed by short vol, which has gained 2.11%.

Commodities and emerging market currencies took hits in August, as did the hedge fund strategies that depend on them. The report’s authors are of the view that the U.S. Federal Reserve may back off of the rate hike, the “normalization” so often spoken of. They write of it as a “fabled rate hike” [italics added], one which may “continue to elude us.”

Vol and Fat Tails
Vol and Fat Tails

Speaking of strategic mandates more broadly, the event-driven mandates were hardest hit by August, in a near-tie for that dubious title with long/short equities. One can say of strategic mandates just as one can of geographic mandates that the carnage was widely shared. Every mandate of the ten Eurekahedge tracks did worse in August than it had in July. Every mandate was in negative terrain. The macro funds recorded the smallest loss.

Year to date, long/short equities lead the pack, with a gain through August of 2.7%, followed by arbitrage at 2.5%.

Special Report

Eurekahedge also included this month a timely special report on Greater China Hedge Funds. The officials of the People’s Republic have been intervening actively through a series of interest rate cuts,

and municipal debt-swap programs. They have also eased banking rules in an attempt to render the economy more liquid.

Greater China mandated hedge funds grew rapidly at the start of 2015 as the equity markets rallied on the strength of such news. Of course, one will hereafter look back at the early months of 2015 through the lens created by the turmoil of August: when China’s equities posted double digit losses, Asia ex-Japan’s HF industry net growth was -3.8.

The Special Report updates its readers on the continued dominance of Hong Kong as the place to headquarter your China mandated hedge fund. More than 80% of such funds have their head office in that city.

Eurekahedge prophecies that hedge funds may take advantage of arb opportunities through the spread between Shanghai A shares and Hong Kong H shares in the years to come. This could fuel a resurgence in arb and relative value strategies generally.

Blame China; Blame The US Fed, Whatever… August Hedge Fund Numbers
 

Related Articles

Blame China; Blame The US Fed, Whatever… August Hedge Fund Numbers

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email